PART II. Structural Change in the tourism sector

I. The Industrial
Structure

The “techno-industrial” space
Raw materials
Market dimension
(horizontal)
Technological
Dimension
(vertical)
Final clients

The concept of « filière »

The vertical or technological dimension :
A “filière” describes a chain of activities transforming raw material to a final product.
Give examples

Representation of a « filière »
Raw materials
Added value
Transformation transportation distribution

Exercice

Represents a tourism « filière »

The tourism « filière »

The specificities ?
The destination

Comment on every stage.
Transformation
Transportation
Tourist
(the consumer)

The tourism “attractiveness” : an added value

The role of economic actor (private and public) in the “filière” : Create attractiveness tourism ( output ) with a specific destination ( input ).

The attractiveness is not given , is not “natural” : it is an economic output.

The creation of tourism value
Tour-operators
Travel Agencies tourists

The structural change (I) : the direct distribution
Tour-operators
Retailing biggie
(mass-distribution)
Travel Agencies tourists
Consumers
(as potential tourists)

Question : What is the strategic objective of tour-operators ?
Observation : tours-operators are developing their own massdistribution network.

Direct distribution of French T.O. (1997)
Tours operators
Asia
Cit Evasion
Fram
Kuoni
Look-voyages
Pacha Tours
Rev’Vacances
Market share
(%)
18
18.5
22
24
25
8
2.5
Agencies number
4
13
67
12
56
8
4

Etourism: the “virtual” agency
Tour-operators internet
Travel Agencies tourists
The new consumer:
« Potential tourists »

Travel sales with internet in USA
16
14
12
10
8
6
4
2
0
1998 1999 2000 2001 2002 2003 billions $

PART II. Structural Change in the tourism sector

I. The Tourism firm

The production function combination
Fixed
Variable standard qualified
INPUT
Technical
Capital
(K)
Human
Capital
(L)
The firm
Question : apply to a tourism firm.
OUTPUT
Final product

The firm constraint and objective

OBJECTIVE
To create wealth (Profit target) : output value > input value

CONSTRAINT
The “optimal” payment of each input:




Labor (wage given by labor market)
Capital (interest & dividend fixed by financial market)
Public factors (taxes fixed by government)
Entrepreneur (profit as a residual income)

The Market Structure



Perfect competition : firm take the price.
Monopoly : firm make the price
Imperfect competition (oligopoly):
firm influence the price. Oligopoly is between pure competition and monopoly.

Firm strategies

Strategic objective: to move on industrial space with



Externalization
Integration
(vertical, horizontal)
Agreement & alliances

Question: Find examples in tourism sector

Types of integration in travel & tourism

Concentration (absorption & fusion) in hospitality / tour-operating industries

Alliances in air-companies sector

Illustration 1

Illustration 2

Illustration 3

References



Evan N. and Stabler M.(1995) « A future for the package tour operator in the 21st century ? » Tourism Economics Vol. 1 Part
3, 245-263.
Gratton C. and Richards G. (1997)
« Structural Change in the European package tour industry: UK/German comparisons » Tourism Economics , Vol. 3,
Part 3, 213-226.
Sheldon P.J. (1986) « The tour operator industry analysis », Annals of Tourism
Research , vol 13, 349-365.

Paper study:

B. Davies and P. Downward
(Staffordshire University)
Competition and contestability in the
UK Package Tour Industry: some empirical observations
Working Paper 98.3.

Exercice:

Production, cost and profit.